JK Cement promoter to offload large stake

13 December 2005

Yadhupati Singhania, owner and Managing Director of JK Cement Ltd, will be off-loading 26 per cent of his stake for raising around Rs 250-300 crore, (around US$65m) early next year. JK Cement, which is popular for its JK White Cement, will utilise the funds for upgrading its white and grey cement capacities. It will also be setting up new power generating facilities. The company was earlier a division of JK Synthetics Ltd. It has three factories and all are located in Rajasthan.

While its grey cement manufacturing capacity would be raised to 4Mta from 3.5Mt, the white cement’s production capacity would be increased to 0.4Mta from the 0.3Mt. The cost of expanding the cement capacity would be Rs 50 crore (approx US$11m). However, the company will be spending another Rs 200 crore for its power facilities. The new power ventures will reduce the per unit production cost of JK Cement. The company will be investing Rs 80 crore for setting up a 20 MW petroleum coke-based power plant and another Rs 100 crore will be spent on installing a 13 MW waste heat recovery plant.

JK Cement will be investing Rs 20 crore for replacing a 10 MW turbine in its existing thermal power at the Bamania cement unit, which produces grey cement. After the completion of these three projects, JK Cement’s power production capacity will increase to 56 MW from 13 MW. According to A.K. Saraogi, President (Corporate Affairs) & Chief Finance Officer, the entire expansion activity would be funded from the proceeds of the equity dilution exercise.

The company would be offering two million shares and would be follow the book-building route. The formal application at the Securities & Exchanges Board of India was filed on December 5, this year. DSP Merrill Lynch has been appointed as the lead manager.

"We are hoping to hit the market either by the end of January or early February, next year. Everything now depends on the time that is needed to complete the total procedure," Saraogi told Business Line. JK Cement is currently listed at the BSE and it is quoting an average price of Rs 165. Singhania is holding a little over 86 per cent. Saraogi did not specify the amount the company hopes to raise from the issue. Instead he said that subsequent to the issue the promoters’ stake in the company would come down to around 60 per cent. There are only two white cement manufacturers in the country. The other is owned by Grasim Industries.